During 2018, the pound was seriously volatile, behaving more like an emerging-market currency than one of the world's supposedly safe havens. It traded between a low of USD 1.25 and a peak of USD 1.44, an exceptionally large 15% range.

There have been numerous headlines about the pound taking steep dives, slumping to record lows, rocketing or being out of control. In December, the pound's volatility reached its craziest levels of the year.

And yet, as the first table below shows, headlines, and even data sometimes, can be deceptive. Despite its startling volatility, the pound fell only 2% in December against the euro, which is by far sterling's most important exchange partner. Indeed, after a year of apparently diving all over the place, the pound was only 2% weaker than it was 12 months before.

The pound-euro exchange rate is one of those most commonly involved in pay calculations for international postings too. Expatriates are understandably concerned when news stories suggest their money might be rapidly losing value. However, while the extreme volatility of the pound in the last month and year confirms that, as we come to the Brexit crunch, nobody is any the wiser about what the final outcome will be, the moderate exchange-rate change overall shows once again that problems can be blown out of proportion by the press. When that happens, the last thing anyone needs is an ill-thought-out response. Emergency pay adjustments and holding referendums come to mind.

Trying to create pay policy for international staff or adjust salaries during volatile conditions can be a minefield for global mobility teams. It is vital to gather the data and take all relevant factors into account (as ECA does to produce its cost-of-living and other surveys). Overreacting to news stories and making big calls on the strength of them can create serious problems for the future, which might not be as easy to sort out as some would have you believe.

Just ask the British government.

Selected currency movements (v EUR)

Country

Currency code

% movement to 31 December 2018 v EUR since:

Latest official annual inflation (%)

3/12/18
(1 month)

1/10/18
(3 months)

2/7/18
(6 months)

1/1/18
(12 months)

Argentina

ARS

-2

+7

-22

-48

48.5

Australia

AUD

-5

-1

-3

-6

1.9

Brazil

BRL

-1

+5

+1

-12

4.0

Canada

CAD

-3

-3

-1

-4

1.7

Chile

CLP

-5

-4

-5

-8

2.8

China

CNY

0

+2

-2

-1

2.2

Egypt

EGP

-1

+1

+2

+4

15.7

India

INR

-1

+5

0

-5

2.3

Indonesia

IDR

-2

+4

0

-3

3.1

Japan

JPY

+2

+4

+2

+6

0.9

Kenya

KES

0

+1

+1

+6

5.7

Korea Republic

KRW

0

+1

+2

0

1.3

Mexico

MXN

+2

-3

+2

+4

4.6

Nigeria

NGN

-1

+1

+1

+3

11.6

Norway

NOK

-3

-6

-5

-2

3.5

Philippines

PHP

-1

+4

+3

-1

6.0

Poland

PLN

0

-1

+2

-3

1.3

Russia

RUB

-5

-4

-9

-15

3.8

Singapore

SGD

-1

+1

+1

+2

0.3

South Africa

ZAR

-6

-1

-3

-12

5.2

Sweden

SEK

0

0

+2

-4

2.0

Switzerland

CHF

+1

+1

+3

+4

0.9

Turkey

TRY

-3

+14

-13

-25

21.6

United Kingdom

GBP

-2

-2

-2

-2

2.3

United States of America

USD

-1

+1

+2

+4

2.2

Venezuela

VES

-81

-90

-99

-99

1300000.0

Most of the world's weakest currencies in December (see next table) belonged to commodity exporters. A combination of the US-China trade war, weaker Chinese and Eurozone economic data and geo-political uncertainty across the world hit commodity prices and darkened the outlook for those reliant on demand for natural resources.

Countries experiencing largest currency losses in December

Country

Currency code

Movement v EUR
3 - 31 Dec 2018 (%)

Inflation
(%)

Australia (Kiribati, Tuvalu)

AUD

-5

1.9

Chile

CLP

-5

2.8

Haiti

HTG

-6

14.6

Russia

RUB

-5

3.8

South Africa (Lesotho, Namibia, Swaziland)

ZAR

-6

5.2

Only two currencies gained more than 2% against the euro in December, as the last table shows: